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Sun 27 Dec 2009 12:15 PM

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South Korean group wins $40bn UAE nuclear deal

Consortium beats US and French rivals to one of Mideast's biggest energy deals.

A South Korean consortium won a $40bn deal to build and operate four nuclear reactors for the UAE, beating US and French rivals to one of the Middle East's biggest ever energy contracts.

Under the deal announced on Sunday, the first nuclear plant in the Gulf Arab region is scheduled to start supplying power to the UAE grid in 2017.

"This deal is the largest mega-project in Korean history," said a statement from the South Korean president's office.

"It is more than six times bigger than the previous single contract."

Led by state-owned utility Korea Electric Power Corp (KEPCO), the consortium will design, build and run four reactors with capacity to produce 1,400 megawatts each of electricity.

The contract to build the plants is worth around $20bn, and the consortium expects to earn another $20bn by jointly operating the reactors for 60 years.

Work on the first nuclear plant in the Gulf Arab region is expected to begin in 2012, and all four reactors are due to be completed by 2020.

The UAE, the world's third-largest oil exporter, needs the nuclear power to help meet an expected rise in electricity demand to 40,000 MW in 2020 from around 15,000 MW last year, amid a petrodollar-fuelled economic boom.

South Korea hopes to build more plants beyond 2020 as the UAE looks to construct more reactors to meet future demand.

"Considering the growth estimates in the UAE's power demand, South Korea expects to win additional projects to build nuclear power reactors in addition to this contract for four reactors," the statement said.

The KEPCO-led consortium includes Hyundai Engineering and Construction, Samsung C&T Corp, Doosan Heavy Industries, and US-based Westinghouse Electric, a unit of Japan's Toshiba Corp, the statement said.

South Korean President Lee Myung-bak was in the UAE to sign the deal with UAE President Sheikh Khalifa bin Zayed al-Nahayan.

The South Korean group beat a French consortium and another group led by US giant General Electric.

The $20bn Korean bid to build the four plants was $16bn lower than the bid submitted by the French group, an industry source said.

"We were impressed by the Korean consortium's world-class safety and its demonstrated ability to meet the UAE program goals," said Mohamed al-Hammadi, CEO of the Emirates Nuclear Energy Corporation (ENEC) in a separate ENEC statement.

The choice of South Korea surprised some analysts, who had expected the deal to go to one of the other consortiums for strategic reasons.

"The UAE's choice must have been based on strictly commercial terms because in terms of political clout in the region it's nil," said Al Troner, president of Houston-based Asia Pacific Energy Consulting.

"Korea has a good track record in terms of safety and price and it's a surprise to see the US and France are not part of the bid because they are the ones with the more political strength in the Middle East."

Nascent nuclear programmes in the Middle East, including in Saudi Arabia and Egypt, have fuelled concerns of a regional arms race.

But the UAE has already pledged to import the fuel it needs for reactors -- rather than attempting to enrich uranium, the fuel for nuclear power plants -- to allay fears about uranium enrichment facilities being used to make weapons-grade material.

Iran has long been at odds with the West over its declared plans to use enriched uranium to generate electricity, a programme the United States and European allies fear is a cover to develop the ability to produce atomic bombs.

The emirate of Abu Dhabi, which is driving the UAE nuclear programme, holds most of the UAE's crude reserves, and has managed to avoid the worst of the global economic slowdown as well as the debt crisis that has hit neighbouring Dubai.

Dubai's debt had cast a shadow over financing prospects for other Gulf borrowers but analysts expect blue-chip names like Abu Dhabi and Qatar to weather the fallout.

"These are long-term projects and many of the finance providers will look beyond what is happening today," said John Sfakianakis, chief economist at Banque Saudi Fransi-Credit Agricole Group in Riyadh. "The UAE's nuclear programme is a strategic project."

He said the UAE could issue bonds in future to fund the project, in addition to the usual mix of project financing methods such as export agencies and banks.

"I think by the time they do this (issue bonds), the Dubai storm will be over, plus Abu Dhabi would have a substantial windfall from oil revenues," he said. (Reuters)

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Omar 10 years ago

I thought and was hopeful that UAE was a leader in green energy with the incredible Masdar initiative. Suddently, the South Koreans and came and the unfortunate news came that UAE is going nuclear!UAE has 360 days of sunshine (highest in the entire earth). Yet, billions will be wasted on nuclear energy while the entire world is going for renewable energy. Shameful and unfortunate to say the least!

The Grand Master 10 years ago

Renewable Energy is the future...

Mounir 10 years ago

Khan, What debts? The UAE does not have any outstanding debts, care to point out to one single debt that the UAE owes? Unless, of course, you meant to say that Dubai should pay its outstanding debts first..at which point i think you will be pleasantly surprised to know that this federal project is entirely funded by...Abu Dhabi. NEXT in the ignorance line!

Simon 10 years ago

I don't often agree with your points...but I definately do with regards to the UAE as a Federal Govt being debt free v's Dubai's situation etc, etc Plus you have developed a sense of humour...which is great!

Mark Flap 10 years ago

Has anyone asked where they will be disposing of the nuclear waste? Hope that's not going to be dumped on the beaches too.

Dan 10 years ago

Mounir, you have been defending UAE very hard in the past in many areas. So have I. But there is a part of UAE and the Middle East that I’m not proud of, which is the censorship of the media. Since end of November, after the announcement in Dubai, you can see a clear increase of edited posts here. Sometimes with no logic such as regarding your latest post.

The Pundit 10 years ago

To all the folks who keep beating up on the UAE for not implementing solar farms, you might, just might, want to take some time to study the requirements for a solar farm. Yes, it is nice to have sun but it actually isn't a huge requirement. Germany, the world leader in Solar Energy, has more cloudy days than sunny days. BUT, what you do need, is a limited dust environment, something Germany has but UAE does not. You see, when the dust (aka sand) even slightly covers the solar panel it degrades its ability tremendously and, in tests done here in the UAE solar panels required daily washing in order to maintain their effectiveness and that, my friends, is expensive in both manpower and water usage. Now wind, that's a much better alternative!

Saeid 10 years ago

AB has just regressed about 10 years in terms of freedom of press. What a shame. It will hurt them more than it will hurt us. I no longer look on AB as a source of open minded, and unbiased news.

JM 10 years ago

Since the signing of that south korean nuclear energy deal, Arabian Business has consistently flashed the value figure of $40Bil while Gulf News reported the official figure of $20Bil as the value for that deal!?!?!!? Just wondering how two main sources of UAE news can be so far apart in terms of accuracy..........

Mark Flap 10 years ago

JM, it's $20bn to build the plants and $20bn to operate them for the next 60 years (!) so both publications are technically correct.